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Brady Opening Statement: Hearing on the Operation, Impact, and Future of the U.S. Preference Programs

November 17, 2009

Thank you, Mr. Chairman.  International trade is a powerful engine for economic growth and job creation, as our experience here at home demonstrates.  One out of every five American jobs depends on trade, and as Ambassador Kirk notes, jobs supported by exports pay higher wages than other jobs.  For that reason, I commend you for holding this hearing.  The global economic downturn has hurt workers all over the world.  International trade will be a vital tool for promoting economic recovery and creating jobs everywhere. 

The indisputable benefits of trade liberalization are why I strongly support open markets, both here in the United States and abroad.  Trade preference programs can be a key tool to help developing countries break into the international market.

Congress has worked on a bipartisan basis to develop preference programs that have provided a vital economic boost to many developing countries.  Congress has also demonstrated its willingness to regularly revisit our programs to make them more effective.  Congress has amended the African Growth and Opportunity Act several times to spur the creation of thousands of jobs in Africa without creating adverse effects on U.S. workers here at home.  The benefits have provided U.S. consumers with better prices and more choices.

Effective trade preferences are one stop on a country’s journey to becoming a full player in the international market.  But trade preferences cannot be an end unto themselves.  In fact, a truly successful trade preference program is one that makes itself obsolete.  

For example, Malaysia and South Korea successfully used GSP as a tool for economic development, exceeding the need for continued benefits and thriving once those benefits were removed.

Chile, Singapore, the CAFTA countries, and Peru all graduated from trade preferences into permanent, bilateral trade agreement relationships, showing that trade preferences are a stepping stone to full engagement in the international market.  These trade agreements offer advantages for both parties over a trade preference relationship. 

Partner countries achieve full, permanent duty-free access to the U.S. market, a significant benefit over the partial, temporary access provided by preferences.  This relationship also sends a strong signal to attract investment and capital.  The capacity building and enforceable labor commitments help improve standards significantly.

For the United States the benefits are obvious.  American workers and businesses finally enjoy a level playing field because these markets are open to U.S. exports, supporting more American jobs.  When Chile, the CAFTA countries, and Peru went from a one-way, preference relationship to a two-way, free trade relationship, the United States went from a trade deficit to surplus with those countries.  In the case of CAFTA, we saw our deficit of over $1.2 billion shift to a trade surplus of over $6 billion, and American workers benefited. 

These examples demonstrate the importance of having developing countries become full members of the international market.  We can quickly realize similar benefits by implementing the FTAs with Colombia and Panama, two countries anxious to move from a one-way relationship to a permanent, mature relationship, leveling the playing field for U.S. workers.

There are many countries that aren’t yet ready to move from preferences to a free trade relationship.  For these countries effective trade preference programs are the right policy. To that end we must design our preference programs to ensure that developing countries can take full advantage of them, assuming they meet certain key conditions. 

That means having eligibility criteria that challenge countries to improve their laws but at the same time encourage investment.  After all, a developing country can have the best labor laws in the world, but that won’t make any difference if there aren’t any jobs.  The eligibility criteria currently enshrined in our preference programs provide the right balance and incentives.  As GAO has noted, we have successfully used these criteria to prompt improvements.

Even for the least developed countries, our preference programs must not become a disincentive to take that next, critical step to becoming full members in the international market through enthusiastic participation in the Doha Round.  The ultimate goal of duty-free/quota-free access to the U.S. market for the least-developed through the Round will provide incentives for these countries to push the emerging developing countries to make the concessions we need to bring the Round to a close.  

Engagement in the international market is a key development tool.  Many countries have benefited from this engagement, and U.S. trade preference programs can help countries take advantage of opportunities to export their goods, create jobs, and eventually join the global market.  With that Mr. Chairman I yield back, and I look forward to hearing from our witnesses.